D.C. Mun. Regs. tit. 9, r. 9-1103

Current through Register Vol. 71, No. 36, September 6, 2024

Rule 9-1103 - TAX CREDITS TO QHTCS: WAGES PAID TO QUALIFIED EMPLOYEES

1103.1

For tax years beginning after December 31, 2000 and ending on or before December 31, 2019, a QHTC shall be allowed a credit against the tax imposed by D.C. Official Code § 47-1817.6 equal to ten percent (10%) of the wages paid during the first twenty-four (24) calendar months to a qualified employee who is employed in the District by the QHTC in any of the activities defined in D.C. Official Code § 47-1817.1(5)(A)(iii) and hired after December 31, 2000.

1103.2

For tax years beginning after December 31, 2019, a QHTC shall be allowed a credit against the tax imposed by D.C. Official Code § 47-1817.6 equal to five percent (5%) of the wages paid during the first twenty-four (24) calendar months to a qualified employee who is employed in the District by the QHTC in any of the activities defined in D.C. Official Code § 47-1817.1(5)(A)(iii) and hired after December 31, 2017.

1103.3

The applicable credit amount taken under § 1103.1 and § 1103.2, and as limited by § 1103.4 and § 1103.5 below, shall be based on the taxable year in which the credits are taken, not on the hire date of the relevant employee.

1103.4

For tax years beginning after December 31, 2000 and ending on or before December 31, 2019, the credit shall not exceed, for each qualified employee, five thousand dollars ($5,000) in a taxable year.

1103.5

For tax years beginning after December 31, 2019, the credit shall not exceed, for each qualified employee, three thousand dollars ($3,000) in a taxable year.

1103.6

The credit shall not be allowed if:

(a) The employee is a key employee;

(b) The QHTC accords the qualified employee lesser benefits or rights than it accords other employees in similar jobs; or

(c) The qualified employee is employed as the result of:

(1) The displacement of another employee;

(2) A strike or lockout;

(3) A layoff in which other employees are awaiting recall; or

(4) A reduction of the regular wages, benefits, or rights of others in similar jobs.

1103.7

A credit allowable under this section may be carried forward for ten (10) years if:

(a) The amount of the credit allowable under this section exceeds the tax otherwise due from a Qualified High Technology Company; and

(b) The amount of the credit allowable under this section was obtained for wages of a qualified employee hired before October 1, 2019.

1103.8

A credit allowable under this section obtained for wages of a qualified employee hired on or after October 1, 2019 shall not be carried forward.

1103.9

The following are examples of the application of §§ 1103.1 to 1103.5:

(a) On January 1, 2019, Company D, a QHTC, hires ten (10) employees at an annual salary of $40,000 each. Since the workers perform the activities described in D.C. Official Code § 47 -1817.l(5)(A)(iii); they are classified as qualified employees. None of the qualified employees are affected by the restrictions of § 1103.6. The annual payroll each year for the 10 qualified employees is $400,000. For tax year 2019, Company D is entitled to a tax credit equal to 10% of the annual salaries of $400,000 received by the 10 qualified employees, or $40,000. For tax year 2020, Company D is entitled to a tax credit equal to 5% of the annual salaries of $400,000 received by the 10 qualified employees, or $20,000, as § 1103.2 would apply.

(b) Assume the same facts as in Example 1, except the annual payroll for each year is $600,000. For tax year 2019, Company D is entitle d to a tax credit of only $5,000.00 for each qualified worker, or $50,000, since the limitation of § 1103.4 would apply. For tax year 2020, Company D is entitled to a tax credit of only $3,000.00 for each qualified worker, or $30,000, since the limitation of § 1103.5 would apply.

(c) Assume the same facts as in Example 1, except five (5) of the qualified employees are entry level and are paid $30,000 each and 5 of the qualified employees are highly skilled and are paid $70,000 each. For tax year 2020, the limitation of § 1103.2 applies to the 5-entry level qualified employees and the limitation of § 1103.5 applies to the highly skilled qualified employees. Therefore, Company D is entitled to a tax credit of $22,500, calculated as follows:

(1) the total annual wages paid to the entry level qualified employees is $150,000 of which five percent (5%), or $7,500, is available for the credit,

(2) the total annual wages paid to the highly skilled qualified employees is $350,000 and since the credit for each of the five highly skilled qualified employee exceeds $3,000, only $15,000 is available for the credit,

(3) $7,500 plus $15,000 totals $22,500.

D.C. Mun. Regs. tit. 9, r. 9-1103

Final Rulemaking published at 49 DCR 2142 (March 8, 2002); amended by Final Rulemaking published at 67 DCR 4766 (5/1/2020)